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Citizens Bank to pay $6.4M to settle federal case

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By Thomas Olson
Tuesday, April 30, 2013, 1:15 p.m.

Citizens Bank agreed to pay $5 million in civil penalties, plus refund $1.4 million to more than 75,000 customers, to settle federal allegations of deceptive marketing of its overdraft and other retail banking practices.

The Federal Deposit Insurance Corp. accused the bank, Pittsburgh's second largest, of misleading customers about overdraft and checking rewards programs, as well as its stop-payment process for automatic debit payments.

Citizens' affiliate RBS Citizens N.A., Providence, R.I., was ordered by the Comptroller of the Currency to pay a $5 million civil penalty and refund $2.5 million to 265,000 customers over similar allegations.

Citizens Bank operates about 130 offices in Western Pennsylvania. RBS Citizens has one in Pittsburgh. Both banks are owned by Royal Bank of Scotland.

“We take the results of these regulatory exams very seriously,” Citizens spokeswoman Sylvia Bronner said. “We have changed the practices identified in these exam results and are working with our regulators to address any customer impacts that they have identified.”

The FDIC and the comptroller, which worked together on the cases, determined Citizens and RBS Citizens violated sections of the Federal Trade Commission Act.

The FDIC did not provide details of Citizens' practices that the agency found to be deceptive. The comptroller provided some examples of how RBS Citizens workers misled some customers.

For instance, bank employees in 2010 failed to disclose that an overdraft protection program did not apply to all transactions.

Additionally, the bank's customer agreement for overdraft protection from late 2007 to late 2011 failed to disclose the bank would not transfer savings account funds to a linked checking account unless the money in savings covered all overdrawn items in a given day, even if it would have covered some overdrawn items.

It was not clear how many of the Citizens or RBS Citizens customers in question are in Western Pennsylvania. The regulators said affected customers need not take action in order to receive payments due to them.

The Citizens Bank transactions affected customers between January 2008 and November 2011. The RBS Citizens transactions affected customers between September 2007 and September 2011.

The FDIC ordered Citizens to determine within 30 days which customers are to receive how much money and to send checks to those people within 90 days after that.

Regulatory reforms in 2010 required banks to stop enrolling customers automatically in overdraft-protection programs covering debit cards. Instead, banks can enroll customers only if they request the coverage. The programs allow customers to overdraft their accounts with a debit/ATM card but get assessed a fee, usually $35 per transaction.

“There continues to be a lot of controversy in terms of how banks generate overdraft fees,” said Greg McBride, senior financial analyst at in North Palm Beach, Fla.

“Consumers didn't want to uwitttingly incur a $35 overdraft fee when buying their morning coffee. So, the law was changed to allow them to opt in,” McBride said. Yet many consumers remain confused, he said.

“Overdraft fees are like speeding tickets,” McBride said. “If you don't want one, don't speed. There has to be consumer responsibility in not overdrawing your account.”

The comptroller said in a statement that RBS Citizens' refunds would “make whole those customers who were harmed as a result of inaccurate or misleading disclosures.”

Thomas Olson is a Trib Total Media staff writer. Reach him at 412-320-7854 or

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